Current Economic Statistics and Review For the Week 
Ended April 14, 2007 (15^th Weekly Report of 2007)

Theme of the week:

All-India Debt and Investment Survey (AIDIS)
State and Region-wise Analysis
Part A - Section 5 

Household Reporting Cash Loans as on 30-06-2002 By Credit Agencies
(Incidence of Indebtedness to Credit Agencies)*

*

1

Introduction

This note is the fifth in the series of notes on all-India debt and investment survey  (AIDIS) conducted by National Sample Survey Organisation in 2003 (January-December) along with some other related surveys, viz., Situation Assessment Survey of Farmers, Land and Livestock Holding Survey, etc., in their 59^th round.

The earlier notes mainly dealt with characteristics of households, value of assets, aggregate amount of debt and debt-asset ratio for various occupational categories and debt and asset distributions among asset holding classes for all states and region-wise.

In this note, it is intended to deal mainly with the households reporting cash loans outstanding as on 30-06-2002, i.e., incidence of indebtedness involved against different credit agencies.

2

Definitional Issues: Loans Against Agencies

Any agency or people, from whom any household took cash loan whether for interest or free of interest, are treated as a credit agency. Thus, if money is borrowed from relatives or friends free of interest, it is treated as that household is indebted to ‘relatives and friends’, whereas if such a loan is taken on interest then those relatives or friends are classified according to their profession and included under the specified categories (say, landlords, traders or money lenders).

Broadly, credit agencies are of two types; they are either institutional agencies or non-institutional agencies.

The above two categories are further sub-divided. The institutional agencies are   eight types as per 59^th survey. The institutional framework for the supply of credit comprises: government; co-op societies/bank; commercial banks including Regional Rural Banks; insurance; provident fund; financial corporation/institution; financial company, and other institutional agencies.

As against the above, there are seven traditional private or non-institutional credit agencies viz., landlords, agriculturist moneylenders, professional moneylenders, traders, relatives and friends, doctors, lawyers and other professionals, and others.

Thus, all borrowings from the government through various departments were classified under ‘Government’. Borrowings from different types of co-operative institutions such as primary credit societies, marketing societies, central co-operative banks and land development banks are included under the group ‘co-operatives’.

 An agricultural moneylender is the one whose income was derived mainly from agriculture and money lending was a subsidiary source of income. On the other hand, the professional moneylender was one for whom money lending is the principal source of income. Loans from landlords to their tenants were classified under the head ‘landlords’. Loans advanced by landlords to persons other than their tenants, were classified under agriculturist moneylender or professional moneylender etc. depending on the occupation of the landowner. Loans from ‘relatives and friends’ related only to interest-free loans given by them.

An analysis of households reporting cash loans outstanding as on June 30, 2002 according to different types of credit agencies providing them with loans, would indicate the dependence of households on institutional vis-à-vis non-institutional sources, i.e., incidence of indebtedness to different credit agencies.

3

 Incidence of Indebtedness (IOI in per cent) – All Credit Agencies

All-India

According to NSSO 59^th Round (January-December 2003), there are 203.4 million households in India , out of which 49.1 million households are indebted to some credit agencies or the other. This means every fourth households in India is indebted in one way or other to some credit agencies as on 30-06-2002. Indebtedness of households, in terms of the percentage of indebted households (IOI) was 24.1 per cent for all households in whole of India .

 Out of the 49.1 million indebted households, 39.2 million households or about 80 per cent of the total indebted households lives in rural areas and the remaining 9.9 million or 20 per cent in urban India (Statement 1). Incidence of Indebtedness (IOI) that is, percentages of households indebted to total households were thus at 26.5 per cent in rural areas and 17.8 per cent in urban India . Contrarily, an estimated 154.3 million households are excluded from the purview of credit agencies’ lending business for some reason or other. At this level, the incidence of financial exclusion i.e. households which are not indebted to any agencies or households which are not reported any cash loan outstanding as on 30-6-2002 works out to be 75.9 per cent for all-India. This figure for rural and urban areas was worked out to be 73.5 per cent and 82.8 per cent, respectively. 

An important point here to note is that while most households are indebted either to the institutional or non-institutional agencies, the cases of availing credit from both the institutional and non-institutional credit agencies are not too many in both rural and urban areas. In fact, it was only 2 per cent in the rural areas and 1 per cent in the urban household that had reported to avail credit advance from both the agencies as per 59^th round.

Rural India

Statement 2 depicts the incidence of indebtedness (IOI) among different household type in rural areas. Out of the 147.9 million households in rural areas, 88.2 million or 59.7 per cent are cultivator households i.e. the households which operates at least 0.002 hectare of land during the last 365 days of the NSSO 59^th round survey. Non-cultivator households, which mainly consists of agricultural laborers, artisans, etc forms 40.3 per cent or 59.6 million households. Among them about 67 per cent cultivator households and 33 per cent non-cultivator households were indebted to some credit agencies as on 30-6-2002 and their incidence of indebtedness works out to be 29.7 per cent and 21.8 per cent respectively. Obviously, the above means the incidence of financial exclusion of   cultivator is 70.3 per cent and non-cultivator is 78.2 per cent.

Urban Areas

Statement 3 presents the IOI of various types of households in urban areas. It can be seen from there, out of the total 55.5 million households, 9.9 million households or every sixth households were indebted and the IOI is 17.8 per cent. Among the urban households, 20.1 million or 36 per cent of the households were self employed and 35.4 million

households or 64 per cent were engaged in other kind of occupations and earns their income from regular wage or salaries and casual labourers. Among self-employed households 3.6 million and 6.3 million households among others were indebted to some credit agencies. Their IOI works out to be 17.9 per cent and 17.8 per cent respectively, indicative of better borrowing facilities enjoyed by households in urban areas as compared to rural areas.

4

Incidence of Indebtedness – Relative Position of Institutional and Non-Institutional

Agencies

            It can be seen from statement 4, that out of the total 203.4 million households in India , 49.1 million or 24.1 per cent households are indebted. Out of this, 13.8 percent of the total households or 28.1 million households were debtors to non-institutional agencies, as against this, households approached the institutional agencies for their debt needs at 25.0 million or 12.3 per cent of the total households are less by a clear 3.1 million households in whole of India.

In rural India , the households borrowed from non-institutional agencies were 2.9million more than that from institutional agencies. However, in urban areas households were not shown any preference to any particular type of institutions with whom they are indebted. This clearly reveals the stranglehold of non-institutional agencies on the rural households mainly due to the uncaring attitude of institutional agencies to the households in general and especially the rural households who approaches the non-institutional agencies viz., money lenders etc for their credit needs. This fact is further strengthened by the fact that almost 88 per cent of the households are excluded from the ambit of institutional credit.

5

Different Type of Institutional Agencies and their importance

As already described above there are 8 type of institutional credit agencies. Out of this 8 different type of institutional credit agencies, 3 credit agencies viz., government, co-op

society/bank and commercial bank including RRB are prominent in extending cash loans to different type of households. These three agencies together lends to more than 19.8 million households in rural areas and 4.4 million households in urban areas (Statement 5). It can also be seen from there that co-op society are catering to the credit needs of people more than the commercial banks.

6

Different Type of Non-institutional Agencies and their importance

As already mentioned above there are 7 non-institutional credit agencies, out of these 7 agencies, the activities of three agencies viz., agricultural moneylender, professional moneylender and relatives and friends are well known. These three agencies together furnish cash loans to 20.5 million households in the rural areas and in 4.8 million urban households (Statement 7).  The lending activities of relatives and friends, who extended credit to 5.5 million rural and 2.0 million urban households are of the nature of extending a helping hand as these loans does not bear any interest.

7

 Region-wise Review

All Credit Agencies

Statement 8 presents number of households, number of indebted households and incidence of indebtedness region wise by all credit agencies.

It can be seen from there that the incidence of indebtedness of all household to all credit agencies works out to be 24.1 per cent. It can also be seen that southern region with an incidence of indebtedness of 33.6 per cent have got more indebted households of 17.83 million, the highest among all regions and which also means one out of every 2.7 indebted households are native of southern states. All other regions have got less than all India incidence of indebtedness with northeastern region at the nadir (Statement 8).  

Institutional Agencies

Number of households, both in rural and urban areas together, which approached to all institutional agencies for their credit needs were 25.0 million whose incidence of indebtedness works out to be 12.3 per cent.  

Among regions, more households in southern and western regions are indebted to institutional agencies (Statement 9). Their incidence of indebtedness (IOI in per cent) i.e. the number of households reported cash loans outstanding as on 20-06-2002 to institutional agencies works out to be 20.9 per cent in case of western region and 16.0 per cent in case of southern region. All other regions have IOI’s less than that of all India at 12.3 per cent.

The highest incidence of indebtedness seems to be among the households of Kerala (32.4 per cent) in southern region, followed by Maharashtra (18.1 per cent) in western region and then Orissa (17.2 per cent) in eastern region.

The lending of institutional agencies to households in Assam, Bihar, Jharkhand Jammu and Kashmir, Punjab Uttranchal and Uttar Pradesh were meagre which can be seen from the fact that the incidence of indebtedness of the households in all these states to institutional agencies are in single digit (Table 3).

Government Agencies

Table 5 gives the number of households reporting cash loans outstanding, as on 30-06-2002 from government agencies were 1.8 million households. More households of West Bengal (0.38 million), Kerala (0.21 million), Andhra Pradesh (0.17 million), Tamil Nadu(0.15 million) approaches the government agencies for their credit needs.

Co-op Society/Bank

            Table 6 depicts the Co-operative societies lending activities among different households in different regions and states. Co-operative societies are one institution, which cater more households than any other institution in disbursing the credit needs of the households. It can be seen from Table 6 that, about 12.2 million households approaches co-operative societies for their credit needs. It can also be seen from the table that rural households approaches to co-operative societies more than the urban households. The incidence of indebtedness at 6.9 per cent for rural households is almost double to that of 3.6 per cent for urban households. It may be mentioned here that the incidence of indebtedness of rural Kerala at 22.1 per cent and rural Maharashtra at 17.7 per cent is the highest among all states. Among rural households, cultivators of Maharashtra has got an IOI of 27.2 per cent, Kerala 24.6 percent followed by Gujarat at 15.1 per cent. Among non-cultivators, the incidence of indebtedness is the highest in Kerala at 19.6 per cent almost 6 times that for all India . Among different states’ urban households, the urban households of Kerala have an IOI of 18.3 per cent with self-employed households having an IOI of 20.8 per cent and the category of households Others having an IOI of 17.1 per cent.

Commercial Bank including RRB

Table 7 throws some light on the activities of commercial banks in their lending programmes. As on 30-6-2002, there were 10.2 million households in whole of India who were indebted to commercial banks i.e. an IOI of 5.0 per cent. Banks cater 8.4 million rural households and only 1.8 million urban households as on 30-6-2002. Out of the 10.2 million households served by the banks about 82 per cent or 8.4 million were rural households and within that cultivator households forms about 74 per cent or 6.3 million. It can also be seen from Table 7 that the households of Southern region (3.3 million) and central region (2.6 million) are better served by commercial banks as compared to the households of other regions.

Non-Institutional Agencies

            Non-Institutional Agencies played a prominent role in credit disbursement as per the NSSO 59^th round survey conducted in 2003 (January-December). Non-Institutional Agencies provided cash loans to 28.1 million households of all India with an incidence of indebtedness of 13.8 per cent.

It can be seen from Statement 10 that vast number of households of southern and northern regions approaches non-institutional agencies for their credit needs. Thus their incidence of indebtedness (IOI in per cent) works out to be 21.3 per cent in case of southern region and 14.0 per cent in case of northern region. All other regions have IOI’s less than that of all India at 13.8 per cent.

The highest incidence of indebtedness seems to be among the households of Andhra Pradesh (29.7 per cent) in southern region, followed by Rajasthan (20.9 per cent) in northern region , then Tamil Nadu (19.7 per cent) again in southern region and Bihar (15.6 per cent) in eastern region. All other states have an IOI less than that of all India at 13.8 per cent.

Agricultural Moneylenders

Table 8 gives the number of households reporting cash loans outstanding, as on 30-06-2002 from agricultural moneylender for whom money lending is a subsidiary activities were 4.9 million households with an IOI of 2.4 per cent. It can be seen from the table that agricultural moneylenders are more active in rural areas than in urban areas. As on 30-06-2002 they provide cash loans to 4.8 million households of which, 3.2 million or 66 per cent of households are indebted to this credit agency. Households of Andhra Pradesh (1.16 million), Karnataka (0.34 million) Uttar Pradesh (0.35 million), were the leading states among all the states.

Professional Moneylender

            Table 9 portrays the professional moneylenders lending activities among different households in different regions and states. Among non-institutional credit agencies, professional moneylenders are one institution, which accommodate more households than any other institution in disbursing the credit needs of the households. It can be seen from Table 9 that, about 12.9 million households approaches professional moneylenders for their credit needs. It can also be seen from the table that professional moneylenders do their business in a big way among rural as well as urban households. The incidence of indebtedness for rural households is 6.7 per cent and that for urban households works out to be 7.1 per cent. The households of Tamil Nadu (15.5 per cent), Andhra Pradesh (14.5 per cent), and Rajasthan (11.4 per cent) approaches professional moneylenders in a big way. It is also true that more cultivator households of the above states approach professional moneylenders.

Relatives and friends

Relatives and friends are one of the important non-institutional credit agencies next to professional moneylenders. They cater to the credit needs of 7.53 million households with an incidence of indebtedness 3.7 per cent (Table 10). This credit agency serves all kinds of households more or less equally. The important aspect of this credit agency is that the cash loans extended by them are free of interest by definition.

Surprisingly, in southern region except Kerala, the households approach to this form of credit agency is very rare as it can be seen from the table that IOI is only 2.6 per cent for the southern region as a whole . It can also be seen from the Table 10 that households of Gujarat had got more relatives and friends who are ready to help them in their needs.

8

Summing up

      (i)      As on 30-06-2002, nearly every fourth household in India was indebted. This was about 27 per cent among the rural households and 18 per cent among urban households.

    (ii)      While institutional agencies cater to the needs of 13.4 per cent of rural household, it was 15.5 per cent in case of non-institutional agencies. The respective proportions for urban households are 9.3 per cent and 9.4 per cent

   (iii)      As an obverse of the incidence of indebtedness, it is the financial exclusion of rural households that stand out. Of about 148 million rural households, bout 109 million or 70 per cent are excluded. Of the 88 million cultivator households, 62 million or similar 70 per cent are excluded. If exclusion by institutional agencies alone are taken into account, of the 148 million rural households, 128 million households or 87 per cent are excluded. On the case of cultivators, about 83 per cent are similarly excluded by the institutional agencies.

  (iv)      Among institutional agencies co-op societies/bank played a major role in credit disbursement to households. They extended cash loans to 12.2 million households.

    (v)      The performances of commercial banks were relatively smaller than that of co-op society as they served only 10.2 million households.

  (vi)      Among non-institutional agencies, professional moneylender and relatives and friends cater to the credit needs of as many as 12.9 million households and 7.5 million households.

 (vii)      Among the different regions, southern region is the most indebted region as on 30-06-2002 with 17.8 million or about 36 per cent of total indebted households in India . The incidence of indebtedness is 33.6 per cent. All the states in this region i.e. Andhra Pradesh, Karnataka, Kerala and Tamil Nadu, all have an incidence of indebtedness higher than that of all India .

(viii)      Western region, which includes Gujarat and Maharashtra , have an IOI of 23.4 per cent.

  (ix)      Other states, which had got higher IOI than all India , are Haryana (24.2 per cent) and Rajasthan (29.7 per cent) in northern region. 

* This note is prepared by R.Krishnaswamy

      TABLES  

Highlights of  Current Economic Scene

AGRICULTURE  

The government of Maharashtra has approved a special package for the sugar industry, which is unable to crush the excess cane caused by a bumper crop. The government is expected to bear an additional burden of over Rs 200 crore on account of the package, which comprises an export subsidy of Rs 1,000 per tonne of sugar for 2007-08, a transport subsidy of Rs 2 per km per tonne and a subsidy for sugar recovery loss (on an average Rs 130 for 1 per cent reduction in the sugar recovery). Provision of this package has been in addition to the government’s decision to exempt sugarcane from the purchase tax.

To ensure adequate remuneration, the central government is considering a proposal to offer farmers the market price for their agricultural produce, that is, the government’s minimum support price (MSP) would in consonance with the market price. The government, at present, offers an MSP for 26 agricultural products, which is fixed annually taking into consideration several factors including crop size, demand and inflation. However, in the backdrop of rising input costs, the government is contemplating over bringing the MSP on par with the market price. The government is also considering setting up a market risk fund to cover perishable agricultural products currently not covered under the MSP.

In order to control the rising prices of pulses, the Cabinet Committee on Economic Affairs has allowed the import of 1.5 million tonnes of pulses over the next six to eight months. The imports would include 0.75 million tonnes of urad, masur moong, tur and 0.75 million tonnes of yellow peas and other pulses. The government has asked public sector agencies Nafed, STC and MMTC to formulate plans for the imports, which would enjoy the subsidy benefit of up to 15 per cent of the difference between domestic and foreign prices. The government has imported about 1.8 million tonnes of pulses in 2006-07.

With a view to control the rising prices of essential commodities and to curb inflation, the central government has reduced the import duty on crude palm oil and refined palm oil by 10 per cent each. Customs duty on crude palm oil, crude palmolein and other fractions of crude palm oil has been lowered to 50 per cent from the earlier 60 per cent, while that on refined bleached deodorised (RBD) palm oil, RBD palmolein and other refined palm oils has been cut from 67.5 per cent to 57.5 per cent. On one hand, the duty cut would bring down prices of edible oils, on the other hand it causes substantial losses for the government. Revenue collection from edible oil has been only Rs 4,188 crore during the first ten month of 2006-07 as compared to Rs 4,771 crore collected during 2005-06.

As per the solvent extractors’ association of India (SEA), total import of edible oils into the country was down by 3 per cent to 14, 01, 071 tonnes from 14, 47, 157 tonnes during November -March 2006-07, while that of non-edible oil was lower by 5 per cent at 2, 41,880 tonnes compared to 2, 55, 521 tonnes.  Import of refined oil during the review period was reported at 27,930 tonne (2 per cent) while crude oil was reported at 13, 73, 141 tonne (98 per cent).

As per the estimates of International Sugar Organization, the world sugar surplus would rise to 8.5 million tonnes, registering an increase of 1.3 million tonne over the a February 2007 forecast of 7.2 million tonnes. Raw sugar output is also likely to reach 161.5 million tonnes level, up from 160.2 million forecast in February 2007.

As per the textiles ministry report, cotton arrivals at mandis in the counter, for the cotton year (October-September) 2006-07 has touched 22.57 million bales as on March 20, 2007. This accounts for 84 per cent of the government’s projection of 27 million bales production during the year. The arrivals are 15.7 per cent higher than 19.5 million bales arrived during the same period in the last year.

Flour mills in southern part of the country have placed orders to import about 4,000 tonnes wheat from Pakistan at $224-$235 per tonne and shipments would start reaching Indian ports from mid-May 2007. The central government had allowed private players to import duty-free wheat till December 31, 2007. In 2006, private players had imported about 8 lakh tonnes of wheat at zero duty, none, however, from Pakistan . 

The country has exported 0.4 million tonnes of sugar since the government withdrew the ban on sugar exports. The government had imposed a ban on sugar exports in July last year and subsequently lifted it for AL companies on December 18, 2006 and for OGL on January 11, 2007. Moreover, licences have been sought for exporting another 0.95 million tonnes of sugar. Total exports in the financial year 2006-07 are estimated at 1.4 million tonnes against 0.31 million tonnes in financial year 2005-06. 

As per estimates of the Rubber Board, the production of natural rubber is pegged at 874,000 tonnes, 2.5 per cent higher in the financial year 2007-08. The total production had grown by 6.3 per cent to peak at 853,000 tonne in 2006-07 compared with 803,000 tonne in the previous financial year. Total domestic rubber consumption has been projected at 853,000 tonnes in 2007-08, around 4 per cent higher compared to previous year   on account of the slow-down in the non-tyre sector as a result of the higher price tags and a 2 per cent increase in the usage of synthetic rubber. 

The central government has pegged urea requirement for the kharif season (April-September) 2007 at 13.2 million tonnes, up 10 per cent from 11.9 million tonnes a year ago. The requirement for di-ammonium phosphate (DAP) has been estimated at 4 million tonnes, and that of muriate of potash (MoP), at 1.65 million tonnes. In the last kharif season, farmers had consumed about 3.2 million tonnes DAP and 1.3 million tonnes MoP. 

Uneven temperature and unseasonal rains have affected nearly 25-30 per cent of mango crops in various parts of the country during the mango season 2007.  Andhra Pradesh is likely to see about 25 per cent decline in output as heavy rains and the consequent floods damaged the mango crop. In Maharashtra , pest attack together with wavering temperature has spoiled to almost 50 per cent of the crop this year.

Industry

The index of industrial prodSuction (IIP) registered an 11 per cent growth during February 2007 as against 8.8 per cent in the same month last year. For April-February 2006-07, IIP improved by 11.1 per cent as against 8.1 per cent in the same period last fiscal. The manufacturing sector improved by 12.3 per cent in February this year compared to 9.2 per cent in the same month last year. For the April-February period, manufacturing grew by 12.1 per cent as against 9.1 per cent in the corresponding period last fiscal. Within the manufacturing sector, basic goods production improved by 10.4 per cent during February 2007 as against 9.6 per cent in February 2006. For the April-February 2006-07 period, basic goods improved by 10.1 per cent, up significantly from 6.5 per cent during the same period last fiscal. The growth in the capital goods sector stood at an impressive 18.2 per cent during February 2007 as compared to 10.7 per cent in February 2006. However, for the first eleven months of 2006-07, the growth in the capital goods sector was marginally up at 17.8 per cent as compared to 16.3 per cent during the same period in the previous fiscal. Growth in the intermediate sector during February this year stood at 13.7 per cent as against 2.2 per cent in the same month last year while for the eleven-month period, the growth stood at 11.6 per cent as against 2.4 per cent in the previous year. The mining sector too did well, recording a growth of 6.3 per cent in February this year against 3.8 per cent in the same month last fiscal while the growth during the first eleven months stood at 4.9 per cent as compared to 0.9 per cent in the same period last fiscal. However, the electricity sector has registered a poor performance. It grew by 3.3 per cent as against 9.1 per cent in February 2006. For the eleven-month period of 2006-07, the electricity sector posted a growth of 7.2 per cent as compared to 5.3 per cent in the same period in the preceding years.

Infrastructure

The index of six infrastructure industries in February 2007, has registered a year-on-year growth rate of 7.2 per cent, as against 9.1 per cent in the same month last year. In the April to February period of 2006-07, infrastructure output has increased by 8.3 per cent, against 6.1 per cent in the corresponding period of the previous year. In addition to cement, electricity generation sector has also slowed down in February 2007. Production of cement has registered a year-on-year growth of 5.8 per cent at 13.5 million tonnes in February 2007. This is low compared to last year's 16.3 per cent growth in the same month. Growth in cement production in the April to January period of the current financial year too has slowed down to 9.5 per cent at 145.86 million tonnes, against a growth of 11.9 per cent in the corresponding period of the previous year. The growth rate of output of finished steel is an impressive 13.5 per cent in February 2007. The output stands at 4.232 million tonnes. In the corresponding period last year, it had grown at 12.4 per cent. Crude petroleum production in the country has increased by 5.0 per cent at 2.669 million tonnes during February this year, against a negative growth of 2.1 per cent in the month last year. Refineries’ output has also increased by 6.8 per cent at 10.783 million tonnes in February this year, as against a 6.5 per cent in the corresponding month last year. Coal production during February 2007 stands at 39.35 million tonnes — growth of 6.6 per cent —compared to a 6.9 per cent growth in February 2006. The electricity generation sector, having the highest weight in the index for six infrastructure industries, had a dampening effect on the overall performance of all the infrastructure sectors due to its poor growth in February 2007. Electricity generation stands at 51.902 million MWh, having a growth rate of 3.3 per cent, as against 9.1 per cent in the corresponding month of the previous year. 

Inflation

The annual point-to-point inflation rate based on wholesale price index (WPI) stood at 5.74 percent for the week ended March 31, 2007 or at a lower rate of 3.98 per cent during the corresponding week last year.

During the week under review, the WPI rose by 0.1 per cent to 210.0 from 209.8 for the previous level  (Base: 1993-94=100). The index of ‘primary articles’ group, (weight 22.02 per cent), rose by  0.3 percent to 215.9 from its previous week’s level of 215.3 mainly due to rise in prices of pork, ragi, bajra, milk, masur, gram.. The index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) remained stagnant. The price index of ‘manufactured products’ group remained stationery at 183.4.

 The latest final index of WPI for the week ended February 3,2007 has been revised upwards; as a result both, the absolute index and the implied inflation rate stood at 208.9 and 6.58 per cent as against their provisional levels of 209.2 and 6.73 per cent, respectively.

Banking

RBI has decided to allow the nominated banks them selves to decide the tenor of the gold (metal) loans. They are permitted to extend this tenor to domestic jewellery manufacturers, who are not the exporters of jewellary, provided the tenor does not exceed 180 days. Earlier, it advised that banks nominated to import gold may extend gold loans to domestic jewellery manufactures on the condition that the tenor of the gold loan should not exceed 90 days.

Taking a cue from LIC, most of the banks have now started publishing details of willful housing loan defaulters in leading newspaper with their respective photographs. The recent entrants in the list are Indian Overseas Bank, Union Bank of India and UTI Bank etc. Most of the banks find this innovative method as the best option for housing loan recoveries. It is gaining ground in the banking industry as at least 60 to 70 per cent of willful default cases get paid up after the free publicity.

Punjab National Bank (PNB) and Oriental Bank of Commerce (OBC) have increased their benchmark prime lending rates (PLR) by 75 basis points. The new rates will come into force from April 16, 2007. After the hike, PNB’s PLR will stand at 13 per cent while it will be at 13.25 per cent for OBC. Banks have decided to go in for hike in PLRs owing to the increase in cash reserve ratio (CRR) and repo rate by the RBI.

Financial Markets

Capital Markets

Primary Market

On 11 April, Gremach Infrastructure Equipments & Projects settled at Rs 83.95, a discount over the IPO price of Rs 86. The stock debuted at Rs 92 on BSE, hit a low of Rs 80.70 and also touched a high of Rs 100.

Real estate developer, Orbit Corporation, settled at Rs 127.95, on BSE on 12 April 2007. The scrip debuted at Rs 90 compared to the IPO price of Rs 110. It also hit a low of Rs 90 and a high of Rs 137.

On 13 April, Credit rating agency ICRA settled at a huge premium, at Rs 797.60, on BSE. ICRA's issue price was Rs 330 per share. The stock listed on BSE at Rs 550, which was also the day's low. The debuting stock then shot up to a high of Rs 880.10.

Secondary Market

The market settled with gains for the week, after posting losses for the previous two weeks. A decline in inflation, firm global markets, steady industrial production data also were the key factors contributing to the rally. The BSE 30-share Sensex surged 528 points (4.11 per cent) for the week ended 13 April, to 13,384.08, while the S&P CNX Nifty gained 165 points (4.43 per cent), to end at 3,917.35.

The week began on highly bullish, with the BSE sensex vaulting 321.66 points, to settle at 13,177.74. A combination of factors like declining crude oil prices, firm global markets, and a report that Indian corporates remain bullish regarding the growth prospects boosted domestic bourses.

The BSE lost 69.43 points, to 13,113.81, as caution gripped the bourses before IT bellwether Infosys’ results. But, it jumped by 270.27 points, to 13,384.08, on 13 April, powered by Infosys’ results and guidance.

In an important development, more than 500 member brokers have agreed to sell a part of their holdings in the BSE to bring it down to 49 per cent, as per the demutualisation guidelines. The BSE also announced receiving overwhelming interest from investors around the globe and the country, to purchase the remaining 41 per cent stake. Two foreign exchanges, Deutsche Borse and Singapore Stock Exchange (SGX), picked up 5 per cent each in Asia ’s oldest exchange earlier this year. The BSE has received interest from over 20 domestic financial institutions, foreign funds, domestic corporates and HNIs, for substantially more than what is required for achieving the demutualisation of BSE, the exchange said in a release. LIC, SBI, Exim Bank and Carlyle are said to be among 20, who have agreed to pick up stake in the bourse. Post-placement, the BSE will go in for an initial public offer to list its shares on the bourses, reports added.

Derivatives                                   

It has been observed that the daily turnover in NSE’s F&O segment has been declining in the past four trading sessions. From Rs 24961.4 crore on 5 April, the daily turnover declined to Rs 19883.04 by 12 April.

The Nifty April 2007 futures settled at 3,797.95, a discount of 31.90 points over the spot closing of 3,829.85.

Government Securities Market

Primary Market

Under the weekly T-Bill auctions, the RBI mopped up Rs.2500 crores (MSS worth Rs.1500 crores) and Rs.2130 crores (MSS worth Rs.1000 crores) through 91-day T-Bill and 364-day T-Bill. The cut-off yields for the 91-day and 364-day T-Bill were 7.3521 per cent and 7.6985 per cent respectively.

 RBI conducted the auction of 7.38 per cent 2015 and 8.33 per cent  2036 for a notified amount of Rs.6000 crores and Rs.4000 crores respectively. The cut-off yields of the 7.38 per cent 2015 and 8.33 per cent 2036 were 8.1609 per cent and 8.5752 per cent respectively.

RBI has announced sale (re-issue) of 7.55 per cent 2010 for Rs.3000 crore under the Market Stabilisation Scheme (MSS) on April 18, 2007.

Secondary Market

During the week, the weighted average call rates during the period ranged between 3.27 per cent and 7.01 per cent, while weighted average repo rates ranged between 2.46 per cent and 6.20 per cent and the weighted average CBLO rates ranged between 1.28 per cent and 5.66 per cent. The average volumes of Call, Repo and CBLO segments were Rs.15597.12 crores, Rs.9603.27 crores and Rs.19662.29 crores respectively. The daily average outstanding amounts in the LAF (reverse repo) conducted during the period were Rs.2999.80 crores. RBI conducted LAF (repo) auction for Rs.760.00 crores on April 09, 2007. The weighted average YTM of G.S 2017 8.07 per cent bond was 8.0388 per cent on April 13, 2007 as compared to 8.1604 per cent on April 05, 2007. The 1-10 year YTM spreads increased by 3 bps to 29 bps.

The People's Bank of China decided to raise the Reserve Requirement Ratio maintained by the commercial banks with the central bank by 50 bps to 10.50 per cent with effect from April 16, 2007.

Bank of Thailand lowered the benchmark 1-day repurchase rate by 50 bps to 4.0 per cent.

Bond Market

IDFC and HDFC have tapped the market to mobilise Rs 150 crore and Rs 450 crore, respectively.

Foreign Exchange Market

The rupee-dollar exchange rate appreciated from Rs 43.15 on April 5 to Rs 42.74 on April 13.

The six-month forward premia closed at 5.95 per cent (annualized) on April 13, 2007 vis-à-vis 5.41 per cent on April 05, 2007.

Commodities Futures derivatives

The National Commodity & Derivatives Exchange Ltd (NCDEX) launched trading in futures contract in polymers to help market participants’ – producers, processors, and distributors/ traders – hedge against volatility in prices. Trading has commenced in three polymer products – Polypropylene (PP), Linear Low Density Polyethylene (LLDPE) and Polyvinyl Chloride (PVC).  The unit of trading as well as the delivery unit for the polymer futures contract is 3 metric tons (MTs). The delivery centre and additional delivery centre for the contract is at NCDEX accredited warehouses at Bhiwandi and Delhi respectively. Exchange approved local and imported grades can be delivered at these delivery centres at par. Daily price fluctuation limit for the contract has been set at 6 per cent. Position limit for members and individual clients has been set at 20,000 MTs and 5,000 MTs respectively. The prevalent spot prices of polymer products as specified in the futures contract is derived through a polling process, whereby the exchange randomly calls up 20 market participants from a panel of 40 participants for the spot prices twice a day. The prices are then subject to a ‘bootstrapping’ process (a scientific process for removing prices that are too far away from the mean) and averaging the remaining prices.

Corporate Sector

Mergers and acquisitions (M&As) volumes in India are expected to touch $50 billion in the current years making the country an important player in the global M&A market. as per CII the total value of M&A deals in India has been growing at a compounded annual growth rate of 28 per cent since 2002 and has crossed $20 billion in 2006. Out of the 480 M&A deals in 2006 amounting to $20.3 billion, Indian companies clocked 266 cross-border deals worth $15.3 billion. North America accounted for the largest portion of outbound acquisitions (32 per cent of the total deals) followed by Europe (29 per cent). The trend is likely to continue in the current year, as Indian companies are likely to take even larger steps globally, particularly in the US and Europe . Outbound deals from India has a sectoral trend with pharma companies being particularly aggressive in scouting for opportunities with more than $2.2 billion worth deals in 2006 followed by IT sector. Tata Steel’s acquisition of the Anglo Dutch steel company ‘Corus’ at a price of $12.1 followed by Hidalco’s acquisition of Novellis for $6 billion has set the trend for the years. The spurt in the cross-border M&A activity is backed by healthy performance at home, strong management capabilities and access to competitive financing.

The government is planning to set an Indian Institute of Corporate Affairs (IICA), on the lines of the IIMs for issues relating corporate affairs and has allocated Rs 211 crore for the institute. The intension behind IICA is to take forward objectives of giving a basic form to corporate affairs and corporate functioning. The institute is likely to be located at Manesar, near Gurgaon and its construction will start by the end of 2007.

Tata Group promoted Trent Ltd has made an agreement with private equity firm The Xander Group Inc for an institutional retail real estate fund in partnership with Indian developers. Xander will be investing in the development of an institutional retail real estate portfolio in India in partnership with high quality Indian developers while Trent will have anchor tenancy rights and obligations and will participate with Xander in the management of such portfolio and its growth. The arrangement will help Trent in its growth plans in the retail sector, including through its current formats like Westside, Landmark and Star India Bazaar. Another large Indian retailer, the Future Group, which owns Pantaloon Retail India Ltd, has floated two retail real estate funds.

Bajaj Auto is all set to launch 250 cc-plus motorcycles in technical collaboration with its Japanese partner Kawasaki Motor shortly. The higher capacity bikes code-named ‘KG’ will be priced at Rs 40,000 and are expected to be out in June-July’2007. In addition the company also plans to launch compressed natural gas (CNG) motorcycles in the next few months.

Bajaj Auto has inaugurated its plant in Pantnagar, Uttarakhand. The plant has a planned capacity of one million units, which can be expanded to three million vehicles. Sited on a 220-acre plot, the plant will be built on 65 acres, while the balance 155 acres will house clusters of vendors. This is Bajaj Auto’s fourth plant and its first manufacturing unit outside Maharashtra . The company has invested Rs 150 crore in the manufacturing unit.

In a bid to diversify into allied sectors like ethanol production and co-power generation, Birla Group of sugar mills would complete its Rs 800 crore expansion works in November’2007. Birla group already has seven sugar and distillery units, four in Uttar Pradesh and three in Bihar . Apart from setting up an ethanol production unit and co-generation power plant Birla group has also increased the capacity of existing units under the expansion plan. Oudh sugar Mill’s Greenfield 7000tcd capacity sugar unit at Hata in Gorakhpur district of Uttar Pradesh at a cost of Rs 336 crore is nearing completion.

In a race for acquiring German firm, REPower Systems AG, Suzlon has upped the ante by offering 150 euro per share. This offer is 7.14 per cent higher than the last offer made by Areva of 140 euro per share on March 15’2007.

Bangalore based Rs 760 crore Strides Arcolab, one of the world’s largest softgel capsule makers with a 100 percent focus on export markets is entering the domestic market by acquiring Chennai based Grandix Pharmaceuticals Ltd. The company is acquiring 100 per cent share holding of the promoters of Grandix Pharma for over Rs 100 crore.

India ’s largest FMCG company Hindustan Lever Ltd (HLL) is preparing a two-pronged plan to strengthen its fabric wash portfolio against arch rival Procter and Gamble India (P&G).  First it is migrating its flagship brand Rin Supreme bar to the premium brand Surf Excel bar to strengthen its presence in the Rs 4,500 crore Indian fabric wash category and then it will also launch its international fabric care brands Comfort and Domestos to take on P&G’s Ariel and Tide.

The Sahara Group has agreed to sell Air Sahara to Jet Airways at an enterprise value of $450 million (Rs 1,980 crore). The price is 13.9 per cent lower than the Rs 2,300-crore deal nine months ago, which broke down because Sahara was unable to secure regulatory nod.

Steel Authority of India (SAIL), Rashtriya Ispat Nigam Ltd (RINL) and National Mineral Development Corp (NMDC) are likely to form a Rs 10,000 crore joint venture for setting up a 3 million tonne steel plant. The project will be partially funded through the internal accruals of the three companies and partially through debt. Although a final decision on the location of the project is yet to be taken, it would most likely come up in Chattisgarh, as NMDC has iron-ore blocks in Chattisgarh.

According to figures released by Society of Indian Automobile Manufacturers (SIAM), domestic car sales crossed the million mark for the first time in 2006-07, finishing the year at 10,76,408 units against 8,82,208 units in the previous year.

With competition intensifying in the entry-level motorcycle market after Bajaj Auto revealed its intention to move out of the 100 cc-segment gradually, market leader Hero Honda is planning to launch at least five new bikes, mostly upgrades of the existing products, during 2007-08.

Tata Steel has agreed to take over Incab Industries – a leading cable producer of yesteryears  - at the request of several trade unions of the sick company. Incab is currently under the Board for Industrial & Financial Reconstruction.

Information Technology

Infosys Technologies posted 56.9 percent growth in net profits at Rs 3,856 crore for 2006-07. Revenue for the fiscal increased by over $1 billion, or 45.9 per cent, to $3.1 billion (Rs 13,893 crore). The company declared a final dividend of Rs 6.50 a share, taking the total dividend to Rs 11.50 a share. In the usually lean fourth quarter of a financial year, it reported a 70 per cent rise in net profit to Rs 1,144 crore.

Telecom

In the largest deployment of WiMAX (Worldwide Interoperability for Microwave Access) anywhere in the world, state-owned BSNL will soon float a tender to offer the wireless broadband service in 1000 cities across the country. BSNL is awaiting the final policy announcement by the department of telecommunications on 3G spectrum and broadband wireless access. The planned tender would be for 1,000 base trans-receivers, which would be a mix of both non-line of sight and line of sight distance.

Despite the ongoing re-verification drive, which saw several disconnections, mobile operators using the GSM technology added over 6.13 million subscribers in March’2007, the highest ever addition since the inception of the cellular service. With the cumulative all India GSM subscriber base has touched 121 million.

*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project.

LIST OF WEEKLY THEMES

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